Preview Of Tomorrow's $1.8 Trillion Option Expiration

After another rollercoaster week, when the latest short squeeze (which ignored hot CPI and retail sales) was followed by a hawkish rug-pull by James Bullard (and even hotter PPI), we are left only with Friday's main event - $1.8 trillion in option expirations which, according to Goldman derivatives trader Brian Garrett, will result in dealers losing much of their left tail convexity.

A closer look at what to expect.

1. Friday brings the second monthly expiry of 2023 (2 down, 10 to go): it will be relatively small compared to prior expiries as “only” $1.8 trillion set to roll off (by comparison Dec 2022 was $4 trillion); According to Garrett's calculations, the breakdown is as follows: